WASHINGTON (MCT) - The Obama administration Friday proposed the first-ever reduction in the amount of ethanol in the gasoline supply, signaling retreat from the Renewable Fuel Standard passed by Congress in 2007.

The Environmental Protection Agency wants 15.21 billion gallons of renewable fuels blended into gasoline and diesel next year, down from 16.55 billion gallons this year. Most of it is corn-based ethanol.

The EPA's proposed biofuel reduction follows concerns from oil companies and some automobile advocates that more than 10 percent ethanol in motor fuel could cause engine damage, a potential issue that is known as the blend wall.

The EPA said adding more ethanol, at a time fuel economy is improving, would push the percentage past 10 percent. Nearly all gasoline sold in the United States now has up to 10 percent ethanol, the agency said.

"For the first time, EPA has acknowledged that the blend wall is a dangerous reality and that breaching it would have serious impacts on America's fuel supply and would be harmful for American consumers," said Jack Gerard, who leads the American Petroleum Institute, the oil industry's main trade group.

The AAA auto club hailed the decision and said it was worried about the impact on vehicles of gasoline blends with more than 10 percent ethanol. "It is irresponsible to mandate more ethanol than cars can safely use," AAA President Bob Darbelnet said.

The decision, however, came under attack from biodiesel advocates and representatives of farmers who grow the corn that becomes ethanol. Republican Sen. Charles Grassley, who represents corn-producing Iowa, blamed "Big Oil" for attacks on the biofuel.

"Despite the ridiculously transparent and self-serving assault by these special interest groups, the relentless campaign to discredit ethanol undermines America's longstanding efforts to diversify its energy landscape, fuel the economy and strengthen national security," Grassley said in a written statement.

Biodiesel advocates denied that ethanol would create a problem for engines. The Advanced Ethanol Council, a trade group, called the idea of a blend wall "imaginary," created to preserve oil company profits, while Bob Dineen, president of the Renewable Fuels Association trade group, accused the EPA of putting the nation's renewable energy policy in the hands of the oil companies.

The ethanol groups expressed hope that the EPA could be persuaded to change course before finalizing its decision.

The Renewable Fuel Standard has come under fire from a variety of sources beyond those who worry it will damage engines.

Some Republicans say its original purpose of lessening dependence on foreign oil is no longer relevant now that the United States is in the midst of an oil boom, while food manufacturers argue the standard drives up corn prices - making it more expensive to raise food animals that are fed corn and driving up the cost of corn-based food additives.

The EPA said Friday that it will seek answers on how to deal with the blend wall.